Leading grades of obsolete scrap–No. 1 heavy melt, shredded scrap, and 5-foot plate and structural–were unchanged to down $2 from July to August in the Cincinnati market. By contrast, No. 1 dealer bundles and No. 1 busheling declined by $10 and $7, respectively.
The basically sideways market for obsolete grades in Cincinnati was due primarily to the export of obsolete scrap to Turkey, brokers say. “There has been plenty of export activity off the East Coast in July and August,” said one Cincinnati broker. “The Turks started a new round of buying before the domestic market developed in August.” In July, by contrast, Turkish steelmakers waited until 6 July, when the domestic market had already developed, before they began buying obsolete scrap off the East Coast (“Turks Take Advantage of Flat U.S. Market,” July 12, 2011).
Brokers expect the Turks to continue buying U.S. scrap. “Our dollar is so weak–that will keep the exports going,” said one Cincinnati broker.
As in other cities, David J. Joseph Co. “came out [buying] early and set the market at close to sideways,” said one Cincinnati-district dealer. Other mills had wanted to take prices down by $10-$30, but the David Joseph buys “forced people [to start buying] sooner” and at prices closer to sideways.
“There was a lot of resistance by dealers to some mills’ attempts to drop prices by $10,” said one broker. “A lot of dealers aren’t selling this month.”
As in the Chicago district, Nucor’s Crawfordsville, Ind., mill bought grades of scrap and from scrap companies that they did not buy from in July. In August the mill is buying tonnages primarily of No. 1 heavy melt, No. 1 dealer bundles, and No. 1 busheling from Cincinnati-district scrap companies.
As in Chicago, the supply of obsolete scrap is tighter than that of prime scrap, but the supply of prime was diminished by the summer shutdowns of industrial plants, as well as by the changeover in tooling for the new vehicle models that will be in production in September.
“In early August the mills didn’t buy the amount of prime scrap that they need,” said one broker. “They might have to buy additional busheling toward the end of August.”
Several scrap executives express concern over the current market turmoil in the U.S. “The stock-market turmoil shows that there are problems with the U.S. economy,” said one dealer. “Until the government can help improve the economy and put people back to work, business will have problems. I like [President] Obama, but he has no program to put people back to work. An investment tax credit would help.” This executive had been considering new investment in his business but now is delaying that.
“It feels like the sky is falling,” said one broker on Monday, 8 August, as the stock market plunged. “No one can be happy with this business environment.”
The plunge in stock prices has hurt metals companies’ stock value. The drop in nickel and copper prices has reduced prices for nonferrous scrap. “We’re looking at a loss of 10-15 percent in the value of our [nonferrous scrap] commodities,” said one Ohio broker.
“The steel business is treading water,” said one broker. As finished-steel prices have declined, steel companies want to drop scrap prices so that they can get the margins they want.
But scrap prices remain historically high, and “scrap companies are making money,” said one scrap executive. “For at least some scrap-brokerage companies, this is their best year ever, financially.”